Ipswich Council refunding landlord licensing fees after Westminster Court of Appeal sex shop case

by Property 118

10:52 AM, 12th February 2014
About 6 years ago

Ipswich Council refunding landlord licensing fees after Westminster Court of Appeal sex shop case

Make Text Bigger
Ipswich Council refunding landlord licensing fees after Westminster Court of Appeal sex shop case

The RLA has recently received an email from Ipswich Borough Council confirming it has started to refund Landlord Licensing fees after the Westminster Court of Appeal sex shop case.

The Court of Appeal found in favour of a European Services Directive which clamps down on purposes fees can be charged by local authorities for landlords licences.

The RLA reported that the Council confirmed it is “currently going through their records to refund landlords of any fees charged on a HMO additional licensing scheme and that once the information is gathered, the Council will contact those landlords and arrange payment.”

The Court of Appeal decision in the Westminster Sex Shop Fees case Hemming t/a Simply Pleasure Limited v Westminster City Council affected fee charging for regulation such as for HMO and selective landlord licensing. Local authorities should abide by European Services Directive rules (ESD) when setting fees.

The ESD rules include:

A Local authority can only take fees for HMO licensing or selective licensing for

  • The actual and direct administrative costs of investigating the background and suitability of the landlord applicant
  • The cost of monitoring the compliance by licensed landlords with the terms of their licences
  • Fees must be reasonable and proportionate and can only cover the actual cost of the application process plus monitoring
  • Local authorities cannot include the costs of enforcing the licensing scheme against unlicensed landlords in the licence fee.
  • Set up charges for the scheme cannot be recovered.
  • Overheads and general administrative costs cannot be recovered and the running and capital costs of the relevant council department cannot be charged as part of the fee.
  • The Council is not allowed to make a profit.

If a Local authority ignores the European Services directive it could be forced to refund overcharged fees and pay interest. Landlords are allowed up to six years to submit a claim for being overcharged.

The RLA has contacted several local authorities to discuss this issue with them, and has been actively challenging other local authorities where licensing schemes are being proposed, such as Northampton Borough Council.

The case details below as reported by the ICLR:

Regina (Hemming (t/a Simply Pleasure Ltd) and others) v Westminster City Council

CA: Lord Dyson MR, Black, Beatson LJJ: 24 May 2013

Since the coming into force of the Provision of Services Regulations 2009 a local authority was not permitted, when determining the reasonable licence fee for sex establishments, to reflect in the fee which it determined the cost of enforcing the licensing system against unlicensed operators.

The Court of Appeal so held, allowing in part the appeal of the defendant local authority, Westminster City Council, from the judgments of Keith J on 16 May 2012 [2012] EWHC 1260 (Admin); [2012] PTSR 1676 and on 12 June 2012 [2012] EWHC 1582 (Admin) when he had allowed the claim for judicial review by seven licensees of sex shops, Timothy Martin Hemming (t/a Simply Pleasure Ltd), James Alan Poulton (t/a Soho Original Book), Harmony Ltd, Gatisle Ltd (t/a Janus), Winart Publications Ltd, Darker Enterprises Ltd and Swish Publications Ltd, of the amount of the annually renewable licence fee to operate sex shops for 2011–2012 determined by the local authority on the basis that the fee had not been determined for that year even though the same annual fee had been demanded of, and paid by them, as in previous years from 2005–2006, and had allowed a claim for restitution. The Court of Appeal upheld the judge’s decision except as to the basis on which restitution was to be made. In September 2004 the authority’s relevant committee had approved an annual fee for sex establishments for 2005–2006 reflecting the costs of administering and enforcing the licensing system which each claimant had paid on demand up to and including 2011–2012 without further consideration being given by the committee.

BEATSON LJ said that section 2 of the Local Government (Miscellaneous Provisions) Act 1982 required operators of sex establishments in areas of local authorities, which had resolved that Schedule 3 to the Act applied to their area, to have a licence. Paragraph 19 of Schedule 3 enabled a local authority to determine and charge a reasonable fee for the licence. It had been possible for the licence fee to reflect the cost to an authority of managing the licensing regime by enforcing it and prosecuting unlicensed operators as well as the cost of investigating and processing an individual application and monitoring compliance by licence-holders with the requirements of the licence: R v Birmingham City Council, Ex p Quietlynn Ltd (1985) 83 LGR 461, 517. Article 13(2) of Parliament and Council Directive 2006/123/EC of 12 December 2006 on services in the internal market (which had effect from December 2009 by the 2009 Regulations) and regulation 18(4) of the 2009 Regulations provided that charges for schemes requiring a person to obtain the authorisation of a competent body to have access to or to exercise a service activity could not exceed the cost of authorisation procedures and formalities. The defendant’s contention was that the judge’s failure to give the 2006 Directive and the 2009 Regulations a purposive construction meant that he disregarded the fact that the Directive was concerned with removing barriers to entry to a market and not preventing a licensing authority from requiring fees to cover the costs of enforcement activity hitherto accepted in national law, and where that activity was ultimately to the benefit of those holding licences; that enforcement benefited those with licences by protecting them from competition by unlicensed traders; and that absence of or much more limited enforcement would inhibit entry by legitimate traders. His Lordship derived assistance from two cases concerning other European Community provisions about fees and charges in understanding the general approach of the Court of Justice of the European Union, Germany GmbH and Arcor AG & Co KG v Germany (Joined Cases C-392/04 and C-422/04) [2006] ECR I-8559 and In re Shopping Centres Licensing: European Commission v Spain (Case C-400/08) [2011] 2 CMLR 1294. The indication from them was that the court had tended to prevent member states imposing costs on businesses which went beyond the costs of the authorisation, registration or inspection process, because such costs constituted illegitimate barriers to the exercise of fundamental freedoms or were inconsistent with principles of Community law. His Lordship rejected the other arguments of the local authority; they did not justify a departure from the clear wording of the Directive and the Regulations, or show that the construction adopted by the judge was inimical to the purposes of the Directive.

BLACK LJ and LORD DYSON MR agreed.Landlord Licensing



Comments

Gary Nock

11:08 AM, 12th February 2014
About 6 years ago

So it seems then that LL Licensing cannot be a cash cow for LAs as they cannot recover set up costs or charge for enforcement.

Let's see how many schemes continue now.

Industry Observer

11:16 AM, 12th February 2014
About 6 years ago

Gary

It never could licensing schemes especially statutory were always meant to be self funding and no more.

This case I thought was rather specific as it related to a fee being charged for a purpose that it could not be and so in essence should never have been raised in the first place - the commercial premises.

I note additional licensing is missing and only mandatory and selective are mentioned. There are far fewer selective schemes and additional is far more common once going beyond mandatory.

Having said that selective deals with massive numbers as it covers ALL rented property whether an HMO or not

Neil Patterson

11:18 AM, 12th February 2014
About 6 years ago

Reply to the comment left by "Gary Nock" at "12/02/2014 - 11:08":

I agree I just don't think Councils will bother if Licensing uses resources rather than creating.

Gary Nock

11:37 AM, 12th February 2014
About 6 years ago

Reply to the comment left by "Industry Observer " at "12/02/2014 - 11:16":

IO I saw how LAs worked on liquor licensing when it moved from the Magistrates Courts - that was supposed to be on the same grounds - not for profit etc. But they found wizard wheezes to hide set up costs and enforcement action within "other expenses of the scheme". They have the accountancy skills of the CIA in hiding "black budget" items and calling them something else. When I did an audit commission joint audit on an unnamed LA and its partners on a 60 million budget 1.3 million had " disappeared" taken from one budget head to another, with one department invoicing another to create a "baseline cost neutral budget". So even though the costs on selective licensing seem to be capped there is more than one way to inflate them and make it seem "cost neutral"

Industry Observer

12:14 PM, 12th February 2014
About 6 years ago

Yes my missus worked for the LA

Don't shoot the messenger I'm only saying what they are supposed to do, how they should operate!!

I'd be much more interested as a Landlord to know whether this ruling also applied to similar fees for additional licensing schemes as they are much more common. Common sense dictates it would but that's not to say it will especially if only mandatory and selective mentioned in the decision.

Gary Nock

12:19 PM, 12th February 2014
About 6 years ago

Reply to the comment left by "Industry Observer " at "12/02/2014 - 12:14":

IO I would not shoot the messenger- there is too much forensic evidence!!! (LOL)

But you know how "windy"LAs get if there is any sniff of being caught out in a Court that could cost them a lot of money/

Mike

13:16 PM, 12th February 2014
About 6 years ago

They also seem to want to shoot us (the landlords) with our own gun, i.e. they can take your money and revoke the licence if should a landlord fail to comply with certain terms, so the money you paid them for a license is used by them to prosecute a landlord! Most authorities are now day light robbers and are immune from punitive measures, I don't see much difference in a thug mugging a paerson going on minding his business and this is what the Councils are doing now,

What if the Police said we are all muggers unless we register with them as law abiding citizens and we have to pay them a fees to get a clean record and a licence to walk down the streets.

Small Fry

2:24 AM, 13th February 2014
About 6 years ago

Great analogy Mike,

"What if the Police said we are all muggers unless we register with them as law abiding citizens and we have to pay them a fee to get a clean record and a licence to walk down the streets."

That's on an exact par with what all our Local Councils have done up here in Scotland - probably as a test-bed for UK-wide deployment later. They impose a Compulsory Landlord/Letting Agent Registration fee of £55 each + £11 per property; the £55 + £11/property both renewable every 3 years.

And for what? So the Council can "make sure they keep good standards of practice." and show they are "fit and proper" landlords or letting agencies. But I know for a fact that my tenants have NEVER been asked what kind of a landlord I am by any Council representative.

Also, officially "The local authority must be satisfied that they are fit and proper persons to let property, before registering them." but no council official has ever tried to determine what kind of landlord I am; not prior to, not during, not after registration. By simply paying the fees, it seems I become a fit and proper landlord and keep good standards of practice.

I always felt our Local Councils have seen us landlords and letting gencies as cash-cows and so I agree with your view that "Most authorities are now day light robbers and are immune from punitive measures."

Question is :
Does anyone know whether our Scottish Local Authorities are in breach of European Services Directives in charging fees for registration and if so what and how would we go about asking for our money back? It's all made so 'official' (Part 8 of the Antisocial Behaviour etc. (Scotland) Act 2004) that it deters any challenge!

Industry Observer

9:14 AM, 13th February 2014
About 6 years ago

Dear oh Dear oh Dear

I'm out


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Advanced tax planning benefits for incorporated landlords

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More